StateBankofIndia-1QFY2012RU-130811

8/6/2019 StateBankofIndia-1QFY2012RU-130811

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Please refer to important disclosures at the end of this report 1

Particulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)NII 9,700 8,058 20.4 7,304 32.8Pre-prov. profit 7,242 6,080 19.1 6,134 18.1

PAT 1,584 21 7,484.1 2,914 (45.7)Source: Company, Angel Research

For 1QFY2012, SBIs standalone net profit declined by 45.7% yoy due to higher

NPA as well as investment provisioning burden. Results on the PBT level were

~14% above our estimates; however, the bottom line was dented by high

effective tax rate of 48.7%. Strong sequential expansion in NIM was the key

positive highlight of the results. NII was well above our as well as streets

expectations. However, fee income growth was rather muted and slippages

remained elevated. We maintain our Buy recommendation on the stock.NIM surprises positively; asset quality continues to disappoint: During 1QFY2012,the banks business momentum moderated in-line with peers; net advances grew

by 1.9% qoq (18.0% yoy) and deposits rose by 1.7% qoq (16.5% yoy). Growth in

agricultural loans (25.7% yoy), mid-corporate loans (21.7% yoy) and SME loans

(21.2% yoy) was healthy. Saving account deposits accretion was strong at 6.5%

qoq (21.3% yoy), driving the 18.8% yoy increase in CASA deposits. CASA ratio

stood healthy at 47.9%. The bank surprised positively by reporting a strong 55bp

qoq expansion in reported NIM, driven by an 87bp qoq rise in yield on advances

as compared to a 40bp qoq increase in cost of deposits. Re-pricing of higher cost

deposits contracted in FY2009 and income tax refund of ~`130cr also aided the

margin expansion. The bank continued to disappoint on the asset-quality front,

with the annualised gross slippages ratio remaining elevated at 3.3% (2.6% in

1QFY2011). Consequently, gross NPA ratio increased to 3.5% from 3.3% in

4QFY2011; however, net NPA ratio was stable sequentially at 1.61%. The banks

capital adequacy profile continues to be weak with tier-I CAR of 7.6%; however,

management appeared confident of raising tier-I capital in FY2012 itself.Outlook and valuation: The stock is trading at 1.4x FY2013E ABV (adjusting forvalue of subsidiaries). In our view, the present valuations provide a good entry

point considering that the earnings growth outlook (42% EPS CAGR over

FY201113E) is strong due to lower regulatory provisioning burden, goingforward. Hence, we maintain our Buy view with a target price of `2,753.

Key financials

Y/E March (` cr) FY2010 FY2011 FY2012E FY2013ENII 23,671 32,526 40,375 46,691% chg 13.4 37.4 24.1 15.6

Net profit 9,166 8,265 12,324 16,655% chg 0.5 (9.8) 49.1 35.1

NIM (%) 2.5 3.0 3.2 3.2

EPS (`) 144.4 130.1 194.1 262.3P/E (x) 15.2 16.9 11.3 8.4

P/ABV (x) 2.3 2.4 2.0 1.7

RoA (%) 0.9 0.7 0.9 1.1

RoE (%) 15.7 13.3 18.9 22.0

Source: Company, Angel Research; Note: Price as on August 12, 2011

BUYCMP `2,193

Target Price `2,753

Investment Period 12 Months

Stock Info

Sector Banking

Market Cap (` cr) 1,39,283

Beta 1.2

52 Week High / Low 3,515/2,123

Avg. Daily Volume 5,13,008

Face Value (`) 10

BSE Sensex 16,840

Nifty 5,073

Reuters Code SBI.BO

Bloomberg Code SBIN@IN

Shareholding Pattern (%)

Promoters 59.4

MF / Banks / Indian Fls 17.4

FII / NRIs / OCBs 13.9

Indian Public / Others 9.3

Abs. (%) 3m 1yr 3yr

Sensex (8.2) (6.8) 8.6

SBI (17.0) (21.2) 37.7

Vaibhav Agrawal022 3935 7800 Ext: 6808

[email protected]

Shrinivas Bhutda022 3935 7800 Ext: 6845

[email protected]

Varun Varma022 3935 7800 Ext: 6847

[email protected]

State Bank of IndiaPerformance Highlights

1QFY2012 Result Update | Banking

August 13, 2011


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State Bank of India | 1QFY2012 Result Update

August 13, 2011 2

Exhibit 1:1QFY2012 performanceParticulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)Interest earned 24,197 21,721 11.4 18,452 31.1- on Advances / Bills 18,256 16,257 12.3 13,422 36.0- on investments 5,414 5,218 3.8 4,472 21.1

- on balance with RBI & others 166 87 91.2 138 20.6

- on others 361 160 125.7 420 (14.0)

Interest Expended 14,498 13,663 6.1 11,148 30.0Net Interest Income 9,700 8,058 20.4 7,304 32.8Other income 3,534 4,815 (26.6) 3,690 (4.2)Other income excl. treasury 3,365 4,481 (24.9) 3,517 (4.3)

- Fee Income 2,633 3,731 (29.4) 2,410 9.3

- Treasury Income 169 335 (49.5) 173 (2.5)

- Forex Income 331 245 35.4 503 (34.1)

- Others 401 505 (20.5) 604 (33.6)

Operating income 13,234 12,874 2.8 10,994 20.4Operating expenses 5,991 6,794 (11.8) 4,859 23.3- Employee expenses 3,717 4,219 (11.9) 3,074 20.9

- Other Opex 2,274 2,575 (11.7) 1,785 27.4

Pre-provision Profit 7,242 6,080 19.1 6,134 18.1Provisions & Contingencies 4,157 4,157 (0.0) 1,551 168.0- Provisions for NPAs 2,782 3,264 (14.8) 1,733 60.5

- Provisions for Investments 1,048 304 244.2 (298) -

- Provisions for Std. Assets 288 631 (54.4) 106 171.9

- Other Provisions 39 (43) - 10 275.1

PBT 3,086 1,923 60.5 4,583 (32.7)Provision for Tax 1,502 1,902 (21.0) 1,669 (10.0)PAT 1,584 21 7,484.1 2,914 (45.7)Effective Tax Rate (%) 48.7 98.9 (5,024)bp 36.4 1,227bp

Source: Company, Angel Research

Exhibit 2:1QFY2012 Actual vs. Angel estimatesParticulars (` cr) Actual Estimates Var (%)Net interest income 9,700 8,637 12.3Non-interest income 3,534 3,881 (8.9)Operating income 13,234 12,519 5.7Operating expenses 5,991 5,542 8.1

Pre-prov. profit 7,242 6,977 3.8Provisions & cont. 4,157 4,270 (2.7)

PBT 3,086 2,707 14.0

Prov. for taxes 1,502 878 71.0

PAT 1,584 1,829 (13.4)Source: Company, Angel Research


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Exhibit 3:1QFY2012 performance analysisParticulars 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)Advances (`cr) 7,70,891 7,56,719 1.9 6,53,220 18.0

Deposits (`cr) 9,50,072 9,33,933 1.7 8,15,297 16.5Credit-to-Deposit Ratio (%) 81.1 81.0 12bp 80.1 102bp

Current deposits (`cr) 85,971 1,07,059 (19.7) 78,427 9.6

Saving deposits (`cr) 3,44,387 3,23,394 6.5 2,83,959 21.3

CASA deposits (` cr) 4,30,358 4,30,453 (0.0) 3,62,386 18.8

Reported CASA ratio (%) 47.9 48.7 (77)bp 47.5 38bp

CAR (%) 11.6 12.0 (38)bp 13.5 (194)bp

Tier 1 CAR (%) 7.6 7.8 (17)bp 9.8 (219)bp

Profitability Ratios (%)Cost of deposits 5.7 5.3 40bp 5.3 39bp

Yield on advances 10.4 9.6 87bp 9.3 113bp

Reported NIM 3.6 3.1 55bp 3.2 44bp

Cost-to-income ratio 45.3 52.8 (750)bp 44.2 107bp

Asset qualityGross NPAs (` cr) 27,768 25,326 9.6 20,825 33.3

Gross NPAs (%) 3.5 3.3 24bp 3.1 38bp

Net NPAs (`cr) 12,435 12,347 0.7 11,074 12.3

Net NPAs (%) 1.6 1.6 (2)bp 1.7 (9)bp

Provision Coverage Ratio (%) 67.3 65.0 230bp 60.7 655bp

Slippage ratio (%) 3.3 3.6 (31)bp 2.6 68bp

Credit cost (%) 0.9 1.1 (21)bp 0.7 24bp


Business traction moderatesDuring 1QFY2012, the banks net advances grew by 1.9% qoq and 18.0% yoy,

underpinned by healthy 25.7% yoy growth in agricultural advances, 21.7% yoy

growth in mid-corporate loans and 21.2% yoy growth in SME loans. Growth in

retail loans stood at 17.7% yoy, led by auto (39.9% yoy), education (21.3% yoy)

and home (20.4% yoy). The banks loan book continues to be well diversified, with

no segment accounting for more than 21% of the total loan book.

Exhibit 4:YoY advances growth below industry


Exhibit 5:CASA growth moderates


16.5

20.4

19.0

21.3

19.8

18.0

8.4

6.8

10.7

14.0

16.1

16.5

78.6

80.179.6

82.7

81.0 81.1

76.0

78.0

80.0

82.0

84.0

-

5.0

10.0

15.0

20.0

25.0

4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

Adv. YoY growth (%) Dep. YoY growth (%) CD ratio (%, RHS)

47.5 47.8 48.2 48.7 47.9

23.4

29.1 27.9

24.2

18.8

-

10.0

20.0

30.0

40.0

30.0

34.0

38.0

42.0

46.0

50.0

1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

CASA ratio (%) CASA yoy growth (%, RHS)


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Exhibit 6:Segment-wise advances growthSegment (%)Large corporate 19.4

Mid-corporate 21.7SME 21.2

Agri 25.7

International 5.3

Home 20.4

Auto 39.9

Education 21.3

Overall advances 18.7Source: Company, Angel Research

Exhibit 7:Well-diversified loan book


During the quarter, deposits accretion was rather moderate at 1.7% qoq. However,sequential traction in saving account deposits was healthy at 6.5%, which was

offset by a 19.7% qoq decline in the volatile current account balances, leading to a

flat CASA deposits base on a sequential basis. Even on a yoy basis, saving account

deposits growth was healthy at 21.3%, driving CASA deposits growth of 18.8%.

CASA ratio stood healthy at 47.9% (48.7% in 4QFY2011 and 47.5% in

1QFY2011).

Strong sequential expansion in NIM on higher yields

The bank surprised positively by reporting a strong 55bp qoq expansion in

reported NIM, driven by an 87bp qoq rise in yield on advances as compared to a40bp qoq increase in cost of deposits. Re-pricing of higher cost deposits contracted

in FY2009 and income tax refund of ~`130cr also aided the margin expansion.

Domestic NIM improved by healthy 56bp qoq to 3.89%, while international NIM

expanded by 35bp qoq to 1.66%.

Management is confident of maintaining the banks NIM in excess of 3.5% levels

(3.3% in FY2011) for FY2012 on the back of re-pricing of advances. We have

increased our NII estimates by 89% for FY2012 and FY2012 to factor in the

better-than-expected NIM performance during the quarter and healthy traction in

saving deposit accretion.

Exhibit 8:Reported NIM rises sharply by 55bp qoq...


Exhibit 9:...primarily due to higher yield on advances


International15%

Mid-Corporate

20%

LargeCorporate

15%SME15%

Agricultural12%

Retail

21%

Others3%

2.96

3.18

3.433.61

3.07

3.62

2.00

2.50

3.00

3.50

4.00

4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12

(%)

9.309.50 9.58 9.56

10.43

8.0

8.5

9.0

9.5

10.0

10.5


(%)


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August 13, 2011 5

Muted non-interest income

Core CEB income growth was weak at 9.3% yoy, as the bank had recently stopped

charging processing fees on certain retail loans. Also, managements focus

seemed to be more on funded exposures rather than on non-funded exposures,

which partly led to lower fee income. Overall non-interest income growth was

weak with forex, dividend as well as miscellaneous income declining sharply.

Exhibit 10:Fee income growth disappointsParticulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)CEB 2,633 3,731 (29.4) 2,410 9.3

Treasury 169 335 (49.5) 173 (2.5)

Forex 331 245 35.4 503 (34.1)

Dividend 228 163 40.1 377 (39.6)

Others 173 342 (49.4) 227 (23.8)

Other income 3,534 4,815 (26.6) 3,690 (4.2)Other income excl. treasury 3,365 4,481 (24.9) 3,517 (4.3)


Slippages remain elevated

On the asset-quality front, the banks annualised slippage ratio for the quarter

remained at elevated levels of 3%+ levels (3.3%) as compared to 2.6% in

1QFY2011 and 2.8% in FY2011. Slippages were high despite the bank being

already on system-based NPA recognition platform. Pressure on slippages was

high from the SME, corporate as well as agri segments, with slippages from theSME segment rising from `1,423cr in 4QFY2011 to `1,961cr, corporate

segments slippages rising from `549cr in 1QFY2011 to `1,716cr and slippages

from the agri segment increasing from `1,259cr in 4QFY2011 to `1,442cr.

Amongst the corporate and SME segments slippages, major industries

contributing to higher slippages were infrastructure, metals, textiles and trading.

Total slippages for the quarter amounted to `6,180cr compared to `5,645cr in

4QFY2011. Slippages from the restructured book during the quarter stood at

`850cr, taking cumulative slippages to 17.2% of cumulative restructuring.

However, due to aggressive recoveries and upgrades (`3,076cr) during the

quarter, the bank was able to contain the increase in gross NPA at 9.6% qoq.

For increasing the provision coverage ratio including technical write-offs to the

RBI-mandated 70%, the bank provided `550cr during the quarter (equal amount

will be provided in 2QFY2012 as well). Consequently, the banks provision

coverage ratio including technical write-offs improved to 67.3% from 65.0% as of

4QFY2011. PCR excluding technical write-offs also improved to 55.2% from

51.3% as of 4QFY2011.

The banks exposure to state government entities including state electricity boards

is relatively lower at ~`6,500cr with only `1,000cr1,500cr exposure to state

electricity distribution companies. Management indicated that it is not seeing anyadditional stress from this portfolio. However, management sounded cautious on

the agricultural loans portfolio.


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August 13, 2011 6

Management indicated that it does not have exposure to sovereign debt of

currently troubled European countries. However, it has ~US$350mn exposure to

PIIGS countries, primarily in the form of trade financing.

Management did not provide guidance on gross slippages but indicated its

confidence in containing net NPAs at 1.5% by FY2012-end from 1.61% as of

1QFY2012.

Exhibit 11:Slippages remain elevated


Exhibit 12:Gross NPAs rise above 3.5%


Credit costs for the quarter moderated from the high (1.1%) level of 4QFY2011

but remained elevated at 0.9%. The bank provided ~`950cr for increased

prudential provisioning requirements and ~`288cr primarily for increased

provisioning requirement on restructured advances. The bank had to take a hit of

`1,048cr towards investment depreciation (~`700cr on the G-Sec portfolio due tohardening of yields and ~`300cr for the MTM hit on equity investments) as

compared to a write-back of `298cr in 1QFY2011.

Exhibit 13:Break-up of provisioning expensesParticulars (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy)NPA 2,782 3,264 (14.8) 1,733 60.5

Standard assets 288 631 (54.4) 106 171.9

Investments 1,048 304 244.2 (298) -

Others 39 (43) (191.5) 10 275.1

Total Provisions 4,157 4,157 (0.0) 1,551 168.0Source: Company, Angel Research

Cost ratios normalise

During the quarter, staff expenses rose by 20.9% yoy, primarily due to lower base

effect and higher headcount. The bank is confident of maintaining a similar

run-rate for employee expenses over the remaining quarters in FY2012.

In 1QFY2011, the bank had written back excess wage revision provisions of

`845cr. Other operating expenses rose by 27.4% yoy, partly due to addition of

over 1,000 domestic branches and over 4,000 ATMs over the past one year.

Cost ratios for the bank normalised from the elevated 4QFY2011 levels. The cost-

to-income ratio improved to 45.3% and the opex-to-average assets ratio declined

to 1.9% during the quarter.

2.6 2.8 2.0 3.6 3.3

0.7

0.8

0.6

1.1

0.9

-

0.3

0.6

0.9

1.2

-

1.0

2.0

3.0

4.0


Slippages (%) Credit cost (%, RHS)

3.1

3.4

3.2

3.3

3.5

1.7

1.7

1.6

1.6

1.6

60.7

62.8

64.165.0

67.3

56.0

60.0

64.0

68.0

-

0.7

1.4

2.1

2.8

3.5


Gross NPAs (%) Net NPAs (%) PCR (%, RHS)


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August 13, 2011 7

Exhibit 14:Opex growth trendsParticulars (` cr) 1QFY12 4QFY11 % chg(qoq) 1QFY11 % chg(yoy)Payment to employees 2,964 3,318 (10.7) 1,451 104.3

Contrib. for employees 753 901 (16.4) 1,623 (53.6)

Total staff expenses (A) 3,717 4,219 (11.9) 3,074 20.9Rent, taxes and lighting 453 503 (10.0) 388 16.9

Dep. on property 200 331 (39.7) 197 1.3

Others 1,621 1,740 (6.9) 1,200 35.0

Other opex(B) 2,274 2,575 (11.7) 1,785 27.4Total opex (A)+(B) 5,991 6,794 (11.8) 4,859 23.3


Exhibit 15:Cost ratios normalise


Capital adequacy remains weak; management confident of

capital raising in FY2012

Adjustment of nearly`8,000cr in reserves on account of pension liability for earlier

years in FY2011 had hampered the banks overall capital adequacy position.

Tier-I capital ratio declined further to 7.6%, well below the comfort level of 8%.

This may raise concerns of capital constraint going forward, if the proposed rights

issue does not go through soon enough. Management seemed confident of the

rights issue going through in FY2012 itself.

Exhibit 16:Capital adequacy profile remains weak


44.2 47.5 45.3 52.8 45.3

1.8

2.12.0

2.31.9

-

0.5

1.0

1.5

2.0

2.5

35.0

40.0

45.0

50.0

55.0


Cost-to-income ratio (%) Opex to average assets (%, RHS)

9.7 9.8 9.7 9.5 9.8 9.6 9.67.8 7.6

4.4 4.3 4.1 3.9 3.8 3.6 3.6

4.2 4.0

14.1 14.1 13.8 13.4 13.5 13.2 13.212.0 11.6

-

4.0

8.0

12.0

16.0

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

Tier I CAR (%) Tier II CAR (%)


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August 13, 2011 8

Performance overview of subsidiaries

SBI Life reported PAT of `144cr for 1QFY2012, registering growth of 26.8%yoy. According to management, SBI Life stood at the No. 1 position with a

market share of 19.8% in private insurance business as of May 2011.

SBI Capital Markets registered a sharp 46.5% yoy decline in PAT to `84crduring 1QFY2012, reflecting the poor capital market activity.

SBI Cards and Payment Services posted PAT of `13cr as compared to PAT of`3cr in 1QFY2011.

SBI DFHI recorded PAT of `5cr. SBI Funds Managements average quarterly AUM increased by 15% as

compared to industrys growth of 6%, leading to improvement in market share

to 6.44%. SBI Pension Funds AUM grew by 53.4% yoy to `4,210cr. During 1QFY2012, the overall SBI Group recorded a 25.3% yoy decline in net

profit to `2,512cr due to fall in SBIs profits.

Investment arguments

Improving savings market share

Until FY2007, the bank witnessed a significant decline in CASA market share with

private sector banks pursuing aggressive branch expansion. However, the banksmarket share of savings deposits has expanded substantially by 320bp to 25.5%

during FY200711 (one of the few PSBs to do so), driven by relatively faster branch

expansion (9.1% CAGR vs. 25% for most PSBs), leveraging its tremendous trust

factor in the country. Even during FY2011, the bank added over 1,000 branches to

further bolster its already strong branch network to 13,542 branches.

Strongest fee income among PSU banks

SBI has a relatively strong share of fee income, owing to its strong corporate and

government business relationships. In FY2011, the bank continued its dominance

with non-interest income/assets at 1.3% (the highest among PSU banks).

Regulatory provisioning burden likely to decline from 2HFY2012

During 1QFY2012, the bank provided for majority of the regulatory provisioning

burden. The provision for recent hike in prudential provisioning requirements, hike

in provision cover for restructured loans and half of the provision required for

achieving the mandated 70% provision coverage ratio have been taken care of in

1QFY2012. In 2QFY2012, the bank is expected to provide `550cr towards the

balance portion for achieving the 70% PCR. From 2HFY2012, we expect the

regulatory provisioning burden to reduce considerably, which should lead to a

better bottom-line trajectory for the bank.


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August 13, 2011 9

Outlook and valuation

We expect SBI to outperform on account of its stronger core competitiveness and

likelihood of credit and CASA market share gains, driven by strong capital

adequacy and robust branch network of more than 13,500 branches. The banks

sustainable CASA ratio of 45%+ is expected to lead to relatively stronger earnings

growth in a rising interest rate environment.

Due to strong CASA market share gains and high fee income, SBIs core RoEs have

improved over the past few years and, unlike most other PSBs, actual FY2011 RoEs

are below core levels due to low asset yields, providing scope for upside as yields

normalise to sectoral averages. We believe, going forward, SBI has ample levers to

deliver healthy operating income growth even in a rising interest rate environment

as well as manage its provisioning requirements.

We have increased our NII estimates for FY201213 by 89%, which has beenoffset by higher opex and provisioning costs including higher tax rate. We have

also increased our estimates for slippages from 2.6% to 3.0% for FY2012 and

from 2.5% to 2.8% for FY2013. Overall, we have cut our earnings estimates by

34% for FY2012 and FY2013.

However, despite the above noted reduction, earnings growth trajectory for the

bank is expected to be strong at a 42.0% CAGR over FY201113E. We expect

provisioning burden to decline from 0.9% of average assets in FY2011 to 0.7% by

FY2013E, thereby driving improvement in RoE to 22.0% from 13.3% in FY2011.

At the CMP, the stock is trading at 1.4x FY2013E ABV (adjusting for value of

subsidiaries). In our view, the present valuation provides a good entry point

considering the earnings growth outlook (expect a 42% EPS CAGR over

FY201113) is strong due to lower regulatory provisioning burden, going forward.

Hence, we maintain our Buy recommendation on the stock with a target price of`2,753 (`2,776).Exhibit 17:SOTP valuation summaryParticulars Target multiple Value/share (`)SBI 1.80x FY13E ABV 2,263

Associate Banks 1.10x FY13E ABV 29

Life Insurance 15.0x NBP 126

Others (AMC, Cap Mkt, Factors, Cards) 67SOTP value 2,753Source: Angel Research


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Exhibit 18:Key assumptionsParticulars (%) Earlier estimates Revised estimatesFY2012 FY2013 FY2012 FY2013Credit growth 16.0 16.0 16.0 16.0Deposit growth 17.0 17.0 17.0 17.0

CASA ratio 50.7 52.0 50.7 52.0

NIMs 2.9 2.9 3.2 3.2

Other income growth 11.5 14.9 4.7 17.9

Growth in staff expenses 5.0 17.0 12.0 17.0

Growth in other expenses 17.0 17.0 18.0 17.0

Slippages 2.6 2.5 3.0 2.8

Treasury gain/(loss) (% of investments) 0.2 0.1 0.1 0.2

Source: Angel Research

Exhibit 19:Change in estimatesParticulars (` cr)

FY2012 FY2013Earlierestimates Revisedestimates Var. (%) Earlierestimates Revisedestimates Var. (%)

Net interest income 37,076 40,375 8.9 43,260 46,691 7.9Non-interest income 17,643 16,579 (6.0) 20,245 19,512 (3.6)

Operating income 54,719 56,955 4.1 63,505 66,203 4.2Operating expenses 25,190 26,289 4.4 29,473 30,759 4.4

Pre-prov profit 29,528 30,665 3.9 34,033 35,445 4.1Provisions & cont. 10,675 11,912 11.6 8,800 10,994 24.9

PBT 18,853 18,754 (0.5) 25,233 24,451 (3.1)Prov. for taxes 5,992 6,429 7.3 8,050 7,796 (3.2)

PAT 12,861 12,324 (4.2) 17,183 16,655 (3.1)Source: Angel Research

Exhibit 20:P/ABV band


0

1,000

2,000

3,000

4,000

5,000

Apr-06

Nov-06

Jun-07

Jan-08

Aug-08

Mar-09

Oct-09

May-10

Dec-10

Jul-11

Feb-12

Price (`) 1.0x 1.5x 2.0x 2.5x 3.0x


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August 13, 2011 11

Exhibit 21:P/E band


Exhibit 22:Premium/Discount to Sensex


Exhibit 23:Angel EPS forecast vs. consensusYear Angel forecast Bloomberg consensus Var (%)FY2012E 194.1 191.4 1.4

FY2013E 262.3 242.2 8.3

Source: Bloomberg, Angel Research

0

1,000

2,000

3,000

4,000

5,000

Jan-05

Sep-05

May-06

Jan-07

Sep-07

May-08

Jan-09

Sep-09

May-10

Jan-11

Price (`) 9x 12x 15x 18x

(70)

(60)

(50)

(40)

(30)

(20)

(10)

0

10

20

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

Discount to Sensex Avg. Hi storical Discount


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Exhibit 24:Recommendation summaryCompany Reco. CMP(`) Tgt. price(`) Upside(%) FY2013EP/ABV (x) FY2013ETgt P/ABV (x) FY2013EP/E (x) FY2011-13EEPS CAGR (%) FY2013ERoA (%) FY2013ERoE (%) AxisBk Buy 1,209 1,64836.3 1.9 2.7 10.0 20.9 1.5 21.0

FedBk Accumulate 392 441 12.7 1.1 1.2 8.1 19.0 1.2 13.9

HDFCBk Accumulate 468 519 10.9 3.2 3.5 16.3 30.5 1.7 20.9

ICICIBk* Buy 940 1,281 36.3 1.7 2.3 13.3 25.8 1.5 16.0

SIB Accumulate 22 24 10.8 1.1 1.3 6.8 11.6 0.9 17.2

YesBk Buy 300 353 17.5 1.9 2.3 10.1 19.1 1.2 20.6

AllBk Accumulate 190 2015.5 0.9 1.0 5.3 9.2 0.9 17.8

AndhBk Neutral 133 -- 0.9 - 5.9 (0.6) 0.9 15.9

BOB Buy 825 1,018 23.4 1.1 1.4 6.2 10.8 1.1 19.6

BOI Buy 338 397 17.5 0.9 1.1 5.3 18.7 0.8 18.0

BOM Accumulate 54 61 13.8 0.7 0.8 5.1 30.8 0.6 14.8

CanBk Accumulate 451 490 8.8 0.9 1.0 5.2 (2.4) 0.9 17.2CentBk Neutral 110 - - 0.8 - 5.3 (14.0) 0.5 14.4

CorpBk Buy 457 566 23.9 0.7 0.9 4.5 2.7 0.8 17.0

DenaBk Neutral 84 - - 0.6 - 4.0 7.0 0.8 16.5

IDBI# Neutral 118 - - 0.8 - 5.5 13.0 0.7 14.3

IndBk Accumulate 214 232 8.5 0.9 1.0 5.4 1.2 1.2 17.8

IOB Accumulate 125 143 14.3 0.8 0.9 4.8 22.4 0.7 16.4

J&KBk Accumulate 827 869 5.0 0.9 0.9 5.7 7.3 1.2 16.5

OBC Accumulate 330 372 12.6 0.8 0.9 5.5 7.5 0.9 14.4

PNB Accumulate 1,086 1,217 12.1 1.2 1.4 6.7 7.4 1.0 20.0

SBI* Buy 2,193 2,753 25.5 1.7 2.1 8.4 42.0 1.1 22.0SynBk Buy 112 131 17.2 0.8 0.9 5.2 8.6 0.6 15.6

UcoBk Neutral 77 - - 1.0 - 4.5 16.0 0.6 17.0

UnionBk Buy 272 313 15.3 1.0 1.2 5.8 20.0 0.8 17.9

UtdBk Buy 88 103 17.3 0.7 0.9 5.2 13.2 0.6 14.1

VijBk Neutral 61 -- 0.8 - 6.6 61.9 0.4 11.7

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF


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Income statementY/E March (` cr) FY08 FY09 FY10 FY11 FY12E FY13ENet Interest Income 17,021 20,873 23,671 32,526 40,375 46,691- YoY Growth (%) 13.0 22.6 13.4 37.4 24.1 15.6Other Income 9,398 12,691 14,968 15,825 16,579 19,512- YoY Growth (%) 26.9 35.0 17.9 5.7 4.8 17.7

Operating Income 26,420 33,565 38,640 48,351 56,955 66,203- YoY Growth (%) 17.6 27.0 15.1 25.1 17.8 16.2

Operating Expenses 12,609 15,649 20,319 23,015 26,289 30,759- YoY Growth (%) 6.6 24.1 29.8 13.3 14.2 17.0

Pre - Provision Profit 13,811 17,916 18,321 25,336 30,665 35,445- YoY Growth (%) 29.8 29.7 2.3 38.3 21.0 15.6

Prov. & Cont. 3,373 3,736 4,396 10,385 11,912 10,994- YoY Growth (%) 11.8 10.8 17.7 136.2 14.7 (7.7)

Profit Before Tax 10,438 14,180 13,925 14,951 18,754 24,451- YoY Growth (%) 36.9 35.8 (1.8) 7.4 25.4 30.4

Prov. for Taxation 3,709 5,058 4,759 6,686 6,429 7,796- as a % of PBT 35.5 35.7 34.2 44.7 34.3 31.9

PAT 6,729 9,121 9,166 8,265 12,324 16,655- YoY Growth (%) 48.2 35.5 0.5 (9.8) 49.1 35.1

Balance sheetY/E March (` cr) FY08 FY09 FY10 FY11 FY12E FY13EShare Capital 631 635 635 635 635 635

Reserves & Surplus 48,401 57,313 65,314 64,351 73,674 86,320

Deposits 537,404 742,073 804,116 933,933 1,092,701 1,278,461

- Growth (%) 23.4 38.1 8.4 16.1 17.0 17.0

Borrowings 51,727 53,714 71,031 79,945 92,930 108,728

Tier 2 Capital 21,289 30,344 31,980 39,624 45,964 53,318

Other Liab & Prov. 62,073 80,353 80,337 105,248 115,871 135,201

Total Liabilities 721,526 964,432 1,053,414 1,223,736 1,421,775 1,662,663Cash balances 51,535 55,546 61,291 94,396 71,026 83,100

Bank balances 15,932 48,858 24,898 28,479 35,375 41,389

Investments 189,501 275,954 295,785 295,601 381,320 454,297

Advances 416,768 542,503 631,914 756,719 877,795 1,018,242

- Growth (%) 23.5 30.2 16.5 19.8 16.0 16.0

Fixed Assets 3,373 3,838 4,413 4,764 5,372 6,097

Other Assets 44,417 37,733 35,113 43,778 50,888 59,539

Total Assets 721,526 964,432 1,053,414 1,223,736 1,421,775 1,662,663- Growth (%) 27.3 33.8 9.2 16.2 16.2 17.0


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RatioanalysisY/E March FY08 FY09 FY10 FY11 FY12E FY13EProfitability Ratios (%)NIMs 2.8 2.6 2.5 3.0 3.2 3.2Cost to Income Ratio 47.7 46.6 52.6 47.6 46.2 46.5

RoA 1.0 1.1 0.9 0.7 0.9 1.1

RoE 18.1 18.2 15.7 13.3 18.9 22.0

B/S ratios (%)CASA Ratio 47.0 41.6 47.3 49.4 50.7 52.0

Credit/Deposit Ratio 77.6 73.1 78.6 81.0 80.3 79.6

CAR 13.5 13.2 12.4 11.1 11.0 11.1

- Tier I 9.1 8.7 8.7 7.2 7.0 7.0

Asset Quality (%)Gross NPAs 3.0 2.9 3.0 3.3 4.3 5.0

Net NPAs 1.8 1.8 1.7 1.6 1.7 1.8

Slippages 2.3 2.6 2.2 2.8 3.0 2.8

Loan Loss Prov./Avg. Assets 0.3 0.3 0.5 0.7 0.7 0.6

Provision Coverage 42.2 39.2 59.2 65.0 68.0 70.0

Per Share Data (`)EPS 106.6 143.7 144.4 130.1 194.1 262.3

ABVPS 709.7 824.2 944.5 928.7 1,117.5 1,321.7

DPS 21.5 29.0 30.0 30.0 36.5 50.0

Valuation RatiosPER (x) 20.6 15.3 15.2 16.9 11.3 8.4

P/ABVPS (x) 3.1 2.7 2.3 2.4 2.0 1.7

Dividend Yield 1.0 1.3 1.4 1.4 1.7 2.3

DuPont Analysis (%)NII 2.7 2.5 2.4 2.9 3.1 3.0

(-) Prov. Exp. 0.5 0.4 0.4 0.9 0.9 0.7

Adj. NII 2.1 2.0 1.9 2.0 2.2 2.3

Treasury 0.3 0.3 0.2 0.1 0.0 0.0

Int. Sens. Inc. 2.4 2.4 2.1 2.0 2.2 2.4

Other Inc. 1.2 1.2 1.3 1.3 1.2 1.2

Op. Inc. 3.6 3.5 3.4 3.3 3.4 3.6

Opex 2.0 1.9 2.0 2.0 2.0 2.0PBT 1.6 1.7 1.4 1.3 1.4 1.6

Taxes 0.6 0.6 0.5 0.6 0.5 0.5

RoA 1.0 1.1 0.9 0.7 0.9 1.1Leverage (x) 17.5 17.2 17.7 19.1 20.9 20.8

RoE 18.1 18.2 15.7 13.3 18.9 22.0


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Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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